Credit growth unlikely to pick up during festive season: Study

Credit growth is unlikely to pick up during the festival season, though improvement is expected in September industrial growth numbers due to restocking by the automobile industry, an SBI report said today.

The SBI Composite Index, an indicator of manufacturing activity in the economy, aims to foresee the periods of contraction and expansion. (Representational image: PTI)

Credit growth is unlikely to pick up during the festival season, though improvement is expected in September industrial growth numbers due to restocking by the automobile industry, an SBI report said today. The yearly SBI Composite Index for September 2017 is at 22-month high of 53.6 (moderate growth) compared to last month’s index of 50.9 (low growth), said the SBI Ecowrap report. The monthly index also jumped to one and half year high of 54.2 (moderate growth) in September, compared 49.9 (low decline) in August.

The SBI Composite Index, an indicator of manufacturing activity in the economy, aims to foresee the periods of contraction and expansion. “The good news is that based on the SBI Composite Index, we believe that the industrial growth (IIP new series) may grow at the highest rate in September,” the report said.

The possible traction in September growth rate is because of evidence of restocking in automobiles. The discounts offered by vehicle dealers possibly enabled them to clear stock and facilitate restocking post GST, it said. The bad news is that there is hardly any difference in credit growth in festive and post-festive months, if “we look at system wise credit data”, the report said.

This means that the current 6.5 per cent pre-festive credit growth may well be the norm in coming months. “This is contrary to current market perceptions that there could be a pick up in credit growth in festive months,” the report said.

It further said the infrastructure sector has been marred by persistent policy logjams, particularly those associated with delayed clearances on the part of the government, aggressive bidding by private developers during the high growth phase and inadequate appraisal mechanisms by financiers, all bringing the infrastructure sector “growth to a standstill”.

Even as the government is “contemplating a comprehensive package”, the project-wise data indicate that currently there are 354 unresolved projects worth Rs 18.1 lakh crore, it said.

State-wise analysis suggests that five states (excluding others and multi-state) account for 52 per cent of total projects under consideration. The list is topped by Odisha, followed by Maharashtra and Jharkhand.